2008_04_08_Notes - UP FRONT, 4-3-08 Reading for next time:...

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UP FRONT, 4-3-08 Reading for next time: 399-403 (introduction to “valuing the environment”) and 411-420 (travel cost method of valuing a park or other attraction) o “MCS” stands for Marshallian consumer surplus. o “V i ” is visits from the ith origin or zone.  In  some models, each individual has his or her  own origin. o For reading 411-420, note also the other  symbol definitions on page 411. Tonight 7:30, Goldwin Smith 142, “What  Would Jesus Buy?” Outline for Today 1) Pollution fee vs. pollution reduction subsidy,  continued
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2) Introduction to cost-benefit analysis 3) Inter-temporal discounting, which is often important in cost-benefit analysis
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Pollution fee vs pollution reduction subsidy In the short run Assume : Price of good is fixed Tax rate t = subsidy rate s > 0 VC(0,0) = 0 Symbols : p: Price of the good y y: Quantity of good output e: Quantity of emissions FC: Fixed cost. Unavoidable in the short run. VC(y,e): Total variable cost of producing y and e, excluding fee payments Firm is charged te :
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Pollution fee vs pollution reduction subsidy In the short run Let ê be a fixed quantity of emissions greater than what the firm would choose with no subsidy. Firm receives s(ê-e) : Same result with subsidy as with tax?
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Pollution fee vs. pollution reduction subsidy In the long run Suppose : 1. emissions e i are proportional to goods output y i . 2.
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2008_04_08_Notes - UP FRONT, 4-3-08 Reading for next time:...

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